HM Revenue & Customs is stepping up its inspections of recruiters and umbrella companies, according to a lawyer who specialises in the recruitment industry.

Kevin Barrow, a partner at Blake Lapthorn, told Recruiter that as part of HMRC’s ongoing review it was focusing on whether travel, subsistence and accounting expenses are being correctly paid.

There are three possible outcomes from an inspection, said Barrow.

1. HMRC is happy with how the agency or umbrella company operates.

2. HMRC is unhappy, and asks the agency to change the way it does things.

3. HMRC decides the agency or umbrella company shouldn’t have paid the expenses tax-free. In this case, Barrow says a settlement is agreed between the parties, with the recruiter or umbrellas agreeing to pay the tax due. 

Significant sums of money are involved, says Barrow, though the only agencies affected are those which employ temporary workers direct.